HOUSTON–(BUSINESS WIRE)–WildHorse Resource Development Corporation (NYSE: WRD) announced today its operating and financial results for the three months ended June 30, 2018. Operational highlights from second quarter 2018 include:
- Increased average daily production by 107% to 46.7 Mboe/d for the second quarter 2018 compared to 22.6 Mboe/d for the second quarter 2017
- Brought online 28 gross (26.2 net) Eagle Ford wells in the second quarter of 2018
- Crude oil realizations in the second quarter of 2018 were 100% of WTI as a result of low differentials and favorable Louisiana Light Sweet (“LLS”) pricing
- The Irene/Inez/Lero Eagle Ford wells, located in Brazos County and previously announced in first quarter 2018, reached their average final peak IP-30(1) of 788 Boe/d (89% oil) on an average 6,404’ lateral
- The JRG C 1H, an Austin Chalk well in southern Burleson County brought online at the end of the first quarter, reached a peak IP-30(1) of 747 Boe/d (43% natural gas, 45% NGLs and 12% oil) on a 5,843’ lateral
Financial highlights from second quarter 2018 and other recent highlights include:
- Reported a Net Loss of $14.1 million for the second quarter 2018
- Reported a Net Loss available to common stockholders of $22.1 million or $0.22 per share for the second quarter 2018
- Reported Adjusted Net Income available to common stockholders(2) of $39.1 million or $0.39 per share for the second quarter 2018
- Reported Adjusted EBITDAX(2) of $161.5 million for the second quarter 2018
- Issued an additional $200 million of 6.875% Senior Notes due 2025 in April 2018
“In the second quarter, WRD delivered excellent results which were amplified by the strength of our takeaway capabilities and LLS pricing. We are currently on track to meet or exceed the midpoint of our annual guidance,” said Jay Graham, Chairman and Chief Executive Officer of WRD. “In addition, WRD is on schedule to start our in-field sand mine by the first quarter of 2019. We have received all of the necessary permits for the mine and are in the process of installing the plants and facilities. WRD is in an enviable position with our Gulf Coast location, access to premium markets, and reduced well costs with the completion of our sand mine. We look forward to leveraging this unique position to drive full cycle returns and create value for our shareholders.”
Second Quarter 2018 Results
Net production was 46.7 Mboe/d for the second quarter 2018 compared to 22.6 Mboe/d for the second quarter 2017. Second quarter 2018 net production consisted of approximately 33.4 Mbbls/d oil, 6.0 Mboe/d NGLs, and 43.5 MMcf/d natural gas.
WRD reported a Net Loss of $14.1 million for the second quarter 2018. The Net Loss available to common stockholders was $22.1 million or $0.22 per share for the second quarter 2018. Earnings in the second quarter were impacted by a $13.8 million non-cash contribution to shareholder’s equity related to Natural Gas Partner’s distribution of WRD shares in May 2018, which is also recognized on the incentive unit compensation expense line of the income statement.
Adjusted Net Income available to common stockholders(2) for the second quarter 2018 was $39.1 million or $0.39 per share. WRD reported Adjusted EBITDAX(2) for the second quarter 2018 of $161.5 million compared to Adjusted EBITDAX(2) for the second quarter 2017 of $52.4 million.
Total revenues and other income for the second quarter 2018, excluding the impact of realized hedges, were $225.4 million compared to $70.2 million for the second quarter 2017. Total revenues were primarily higher as a result of increased production and higher commodity prices. Crude oil price realizations were 100% of WTI as a result of low transportation differential and favorable LLS pricing. Natural gas realizations were lower than previous quarters at 73% of Henry Hub as a result of the North Louisiana asset divestiture which had higher gas realizations. Also, in comparison to North Louisiana, the structure of WRD’s gas contracts in the Eagle Ford allocates a greater portion of gathering costs to revenue deductions rather than GP&T expenses following the new FASB revenue recognition standard (ASC 606, Revenue from Contracts with Customers).
Average realized prices for the quarter ending June 30, 2018 and 2017, before the effect of commodity derivatives, are presented below:
|Oil (per Bbl)||$||68.21||$||46.77||46||%|
|Natural Gas (per Mcf)||$||2.05||$||3.09||-34||%|
|NGL (per BbL)||$||17.59||$||16.59||6||%|
|Total (per Boe)||$||52.99||$||33.90||56||%|
Average realized prices for the quarter ending June 30, 2018 and 2017, after the effect of commodity derivatives, are presented below:
|Oil (per Bbl)||$||57.49||$||49.80||15||%|
|Natural Gas (per Mcf)||$||2.02||$||3.07||-34||%|
|NGL (per BbL)||$||17.59||$||16.59||6||%|
|Total (per Boe)||$||45.30||$||35.54||27||%|
Lease operating expense (“LOE”) for the second quarter 2018 was $12.1 million, or $2.84 per Boe, compared to $6.8 million, or $3.33 per Boe, for the second quarter 2017. The decline in LOE was the result of optimized chemicals usage and more favorable procurement and labor contracts.
Depletion, depreciation, and amortization (“DD&A”) for the second quarter 2018 was higher at $70.7 million or $16.64 per boe in comparison to $59.9 million or $12.70 per boe during the first quarter 2018. In the first quarter, DD&A for North Louisiana was accounted for until the execution of the definitive North Louisiana purchase and sale agreement on February 12, 2018. Due to this effect, DD&A on a boe basis was lower in the first quarter of 2018. In addition, the DD&A rate in the Eagle Ford was higher in the second quarter of 2018. As a result, higher second quarter DD&A negatively impacted our net income relative to expectations based on the first quarter DD&A rate.
Gathering, processing and transportation expense (“GP&T”) for the second quarter 2018 was $0.5 million, or $0.11 per Boe, compared to $1.9 million, or $0.95 per Boe, in the second quarter 2017. GP&T was significantly lower on a Boe basis due to the implementation of the new FASB revenue recognition standard ASC 606, effective as of January 1, 2018, and the sale of our North Louisiana assets. In addition, natural gas and NGL revenue realizations were also impacted under the new standard. For additional information, please see the appendix of this press release and the Management’s Discussion & Analysis section of WRD’s second quarter 2018 Form 10-Q for a reconciliation of GP&T and pricing realizations to the previous accounting convention.
Taxes other than income were $12.8 million for the second quarter 2018, or $3.01 per Boe, compared to $4.5 million, or $2.20 per Boe, for the second quarter 2017. Taxes other than income in the second quarter 2018 increased primarily due to higher price realizations and changes in the commodity mix.
General and administrative (“G&A”) expense for the second quarter 2018 was $12.9 million, or $3.04 per Boe, compared to $10.0 million, or $4.89 per Boe, for the second quarter 2017. Reported G&A expense is net of $1.0 million due from Tanos Exploration for transitional services in connection with the purchase of the North Louisiana assets. During the second quarter 2018, G&A expense included $3.8 million, or $0.90 per Boe, of stock-based compensation expense and $0.1 million, or $0.03 per Boe, of acquisition related costs. Excluding acquisition related costs, cash G&A expense(2), which does not include stock-based compensation, was $9.0 million or $2.11 per Boe for the second quarter 2018.
Exploration expense was $4.4 million for the second quarter 2018 compared to $11.5 million for the second quarter 2017. Exploration expense in the second quarter reflects a decrease in seismic acquisition costs and abandonment costs.
Net interest expense during the second quarter 2018 was $14.0 million, including amortization of deferred financing fees of approximately $0.8 million. This compares to net interest expense during the second quarter 2017 of $6.6 million, including amortization of deferred financing fees of approximately $0.4 million. The increase in net interest expense is primarily the result of higher levels of indebtedness due to the issuance of additional senior notes in 2017 and April 2018.
Drilling and completion (“D&C”) capital expenditures totaled $233.3 million in the second quarter 2018 and $450.0 million for the first half of 2018 which is in line with WRD’s front-weighted capital budget program. Sand mine expenditures totaled $15.8 million in the second quarter 2018 and $25.1 million for the first half of 2018.
|The initial production rates represent the peak average of the initial production rates for the applicable consecutive days of production.|
|Adjusted EBITDAX, Adjusted Net Income (Loss) available to common stockholders, Cash G&A, and net debt are financial measures not calculated in accordance with accounting principles generally accepted in the United States of America (“GAAP”). Please see the reconciliation to the most comparable measures calculated in accordance with GAAP in the “Use of Non-GAAP Financial Measures” section of this press release.|
WRD reported second quarter 2018 average daily production of 46.7 Mboe/d consisting of 72% oil, 15% natural gas, and 13% NGLs. WRD brought online a total of 28 gross (26.2 net) Eagle Ford wells and 5 Eagle Ford refracs in the second quarter 2018.
In the Eagle Ford, the Irene, Inez, and Lero wells, brought online late in the first quarter in Brazos County have reached their average final IP-30 rate(1) of 788 Boe/d (89% oil) on an average 6,404’ lateral.
In the Austin Chalk, the JRG C 1H, a well located in southern Burleson County brought online at the end of the first quarter, reached a peak IP-30(1) of 747 Boe/d (43% natural gas, 45% NGLs and 12% oil) on a 5,843’ lateral. WRD brought online no new Austin Chalk wells in the second quarter but expects to bring online four Austin Chalk wells in the third quarter or early fourth quarter of 2018 depending on timing.
In April 2018, WRD issued an additional $200 million of 6.875% Senior Notes due 2025. In addition, Moody’s increased WRD’s Long Term Corporate Family Rating to B2 with a positive outlook from B3 with a stable outlook during the second quarter of 2018. Total net debt(2) outstanding as of June 30, 2018 was $930 million, including $249 million of debt outstanding under WRD’s revolving credit facility, $700 million of Senior Notes due 2025, and $19 million in cash and cash equivalents. As of June 30, 2018, WRD’s liquidity was $820 million consisting of $19 million of cash and cash equivalents and $801 million of availability under its revolving credit facility. The next redetermination of the borrowing base utilizing mid-year 2018 reserves is scheduled for October 2018.
WRD’s net debt(2) to annualized second quarter 2018 Adjusted EBITDAX(2) ratio was 1.4 times. WRD continues to target a net debt(2) to quarterly annualized Adjusted EBITDAX(2) ratio below 2.0 times based on the mid-point of guidance. WRD expects the available borrowings under its revolving credit facility to provide sufficient liquidity to finance anticipated working capital and capital expenditure requirements.
WRD utilizes its hedging program to mitigate financial risks and the effects of commodity price volatility. Total hedged production in the second quarter of 2018 was approximately 2.6 MMboe, or 62% of second quarter production of 4.2 MMboe. As of August 7, 2018, WRD had hedged approximately 65% of its remaining 2018 production on a barrel of oil equivalent basis (using the mid-point of WRD’s annual guidance range).
In the second quarter, WRD entered into additional natural gas contracts extending to 2020. Specifically, WRD hedged approximately 22.4 billion cubic feet of natural gas distributed across 2018 to 2020 at approximately $2.79 per Mcfe. In addition, during the second quarter, WRD added 3.4 MMbls of oil swaps out to 2020 and also added 1.9 MMbls of oil basis hedges on average locking in a LLS premium to WTI of approximately $3.01 per Bbl for the remainder of 2018. With a combination of puts and unhedged production, WRD maintains upside on approximately 52% of its remaining 2018 oil production.
The following table reflects WRD’s hedged volumes and corresponding weighted-average price, as of August 7, 2018.
|Q3 – Q4 ’18||2019||2020|
|Crude Oil Hedge Contracts:|
|Total crude oil volumes hedged (Bbl)||4,614,905||8,402,126||4,511,681|
|Volumes hedged (Bbl/d)||25,081||23,020||12,327|
|Total weighted-average price||$||51.53||$||54.32||$||53.49|
|Expected crude production hedged (3)||75%||–||–|
|Natural Gas Hedge Contracts:|
|Total natural gas volumes hedged (MMbtu)||4,723,634||6,425,146||4,846,020|
|Volumes hedged (MMbtu/d)||25,672||17,603||13,240|
|Total weighted-average price||$||2.79||$||2.79||$||2.76|
|Expected gas production hedged (3)||86%||–||–|
|Total Hedge Contracts:|
|Total hedged production (boe)||5,402,177||9,472,984||5,319,351|
|Volumes hedged (Boe/d)||29,360||25,953||14,534|
|Total weighted-average price ($/boe)||$||44.43||$||48.49||$||45.79|
|Expected total production hedged (3)||65%||–||–|
|LLS Basis Swaps|
|Total crude oil volumes hedged (Bbl)||3,339,230||–||–|
|Volumes hedged (Bbl/d)||18,148||–||–|
|Total weighted-average price – WTI to LLS||$||3.02||–||–|
|Expected crude production hedged (3)||54%||–||–|
(3) Using the mid-point of WRD’s 2018 guidance ranges.
Members of WRD’s management team intend to participate in the following upcoming investment conferences:
- EnerCom Oil & Gas Conference on August 20 – 21, 2018 (Denver, CO)
- Simmons European Energy Conference on August 28 – 29, 2018 (Gleneagles, Scotland)
- Seaport Global Chicago Energy Conference on August 28 – 29, 2018 (Chicago, IL)
- Barclays CEO Energy-Power Conference on September 4 – 5, 2018 (New York, NY)
- Johnson Rice 2018 Energy Conference on September 24 – 26, 2018 (New Orleans, LA)
Presentation materials for all conferences mentioned above will be available on WRD’s website at www.wildhorserd.com on or prior to the day of the respective presentation.
Quarterly Report on Form 10-Q
WRD’s financial statements and related footnotes will be available in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2018, which will be filed with the U.S. Securities and Exchange Commission (“SEC”) on or before August 9, 2018.
Conference Call and Webcast
WRD will host an investor conference call tomorrow morning, August 8, 2018 at 8 a.m. Central (9 a.m. Eastern) to discuss the second quarter 2018 operating and financial results. Interested parties are invited to participate on the call by dialing (877) 883-0383 (Conference ID: 9209183), or (412) 902-6506 for international calls, (Conference ID: 9209183) at least 15 minutes prior to the start of the call or via the internet at www.wildhorserd.com. A replay of the call will be available on WRD’s website or by phone at (877) 344-7529 (Conference ID: 10121205) for a seven-day period following the call.
About WildHorse Resource Development Corporation
WildHorse Resource Development Corporation is an independent oil and natural gas company focused on the acquisition, exploration, development and production of oil, natural gas and NGL properties primarily in the Eagle Ford Shale and Austin Chalk in East Texas. For more information, please visit our website at www.wildhorserd.com.